We have a loss on the sale of inherited home. We received a 1099-S form. How do we enter this within TurboTax

[DS30]

It depends.

If after you inherited the property, you used the property for personal use, then you will not report the loss.(The IRS does not allow a capital loss on the sale of personal use property. This rule applies to the sale of a inherited property that was a personal use property. The TurboTax system will enter a capital loss of zero for this transaction.)

However, if no one used the home for personal use before the sale, enter this as an investment in order to claim a capital loss on your tax return.

Click this link for further information about reporting the sale of a capital asset

• To enter this transaction in TurboTax, log into your tax return  (for TurboTax Online sign-in, click Here  and click on "Take me to my return") and type "investment income (gains and losses)" in the search bar then select "jump to investment income (gains and losses)". TurboTax will guide you in entering this information (see step 6 below) 

Alternatively, To enter this transaction in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on” (jump to full list or show more income)
4. Scroll down the screen until to come to the section “Investment Income”
5. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section)
6. The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
7. Since you did not receive a 1099-B, answer “no” to the 1099-B question
8. Choose type of investment you sold - select everything else
9. Some basic information:
1. Description –  Usually the address of the property sold
2. Sales Proceeds – Net proceeds from the sale (1099-S amount received for the property)
3. Date Sold – Date you sold the property (on 1099-S)
10. Tell us how you acquired the property - inheritance
11. Enter the date inherited
12. Enter the your fair market value - Fair Market Value of the property at the time of inheritance plus any capital improvements since inheriting it 
13. If you had a loss, on the question of "Did you use this property for business or investment?" If the inherited house was not used for any personal use (no family member lived in it or used it between the time of inheritance and the sale), you will answer that this was for investment

Click IRS answers on Gifts and Inheritance for more information from the IRS on the sale of an inherited property.

[bonnier3305]

I am trying to enter the loss on property I sold which I inherited.  I tried the method below and there is no question which comes up asking was business or investment.  It is not allowing the loss.  How do I handle this.  I have already upgraded to the Priemer Edition as I read on another post that I would need it for this transaction.  Please help.    Bonnie Reeves

[MarilynG1]

@bonnier3305 You cannot take a loss on property that was never used for investment purposes.

From the IRS:   A loss on the sale or exchange of personal use property, including a capital loss on the sale of your home used by you as your personal residence at the time of sale, or loss attributable to the part of your home used for personal purposes, isn't deductible.

Only losses associated with property (or a portion of property), used in a trade or business and investment property (for example, stocks) are deductible.

You can add any sales expenses to the cost basis when reporting the sale.

Click this link for info on Sale of Inherited Property. 

[yr12]

If the home was inherited and sold within the year but never lived in and sold for less than FMV then the loss is not deductible? I have seen several other posts stating it's deductible if never used for personal use and sold at arm's length transaction.  But I am trying to finalize our tax return and keep getting a message that states I can't take a loss on personal use property, but this property was never used for personal use. Any help would be greatly appreciated.

[JotikaT2]

Yes, the loss is potentially deductible if you are within the allowable limits for capital losses.  Your basis in the inherited home would be the fair market value of the house on the date of death of the decedent.   This is typically determined by an appraisal of the property.  The difference between the sales price, your cost basis, and any other selling expenses would result in your potential capital loss.

Please see this link for steps to guide you in entering this sale in your tax return.

You can also refer to this link if you have any additional questions on any other property or assets inherited.

@yr12